PAM

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Saudi Non-Oil Sector Grows

Non-oil private sector in Saudi Arabia continued to improve last month bolstered by sharp expansions in new orders and output. International demand for Saudi Arabian products and services picked up, as highlighted by a renewed increase in new export orders. Growth of staffing levels was sustained during August, as companies responded to greater capacity pressures by taking on extra staff.

Companies continued to face upward cost pressures, but their ability to fully pass on higher cost burdens to consumers was restricted by intensive competitive conditions. The rate of growth in inventories climbed to a record high, reflecting greater buying levels.

Commenting on the Saudi Arabia PMI survey, Haque said: “Saudi Arabia’s non-oil sectors expanded at a solid rate in August, with the headline PMI broadly unchanged from July. The recovery in export orders helped boost overall new order growth to the fastest rate in four months in August, while output also showed a sharp rise last month.”

Key findings

• Headline PMI rises to 55.8 in August• Sharp increases in output and new orders• Record rise in inventories

The Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) edged up to 55.8 in August from 55.7 in July. This was consistent with the strongest improvement in operating conditions since April. However, the headline PMI remained below its long-run average (58.1).

The upward movement in the headline index was supported by a sharper increase in new orders. The rate of growth in new work quickened to the fastest in four months. More projects and stronger underlying demand were cited by panelists as the key factors behind greater inflows of new business.

Despite softening from the preceding month, output grew sharply. Panelists attributed the rise in business activity to favorable economic conditions.

Companies observed a renewed expansion in new export orders during August. Growth was recorded for the second time in the past five months. Opportunities arising from new export markets were frequently linked by panelists to stronger international demand for Saudi Arabia’s products and services.

Firms faced capacity pressures for the tenth successive month and raised payroll numbers accordingly. The rate of job creation slowed to the weakest since April, however.

Companies purchased greater quantities of inputs during August. As a result, inventories were accumulated at the sharpest rate in the survey history.

Firms faced higher cost burdens during August, with both purchasing prices and staff salaries rising further. Consequently, firms passed on higher input costs to consumers. However, the pace of output price inflation was only marginal.

Although the level of positive sentiment dipped to the lowest since October 2016, firms retained positive expectations over the 12-month outlook for output. Optimism was rooted in forecasts of further improvements in market demand.